In the face of appeals and threats of legal action, Arts Council England has this morning confirmed it is to cut funding from the independent publisher Dedalus Books and the east London literature centre, Centerprise.

The British Centre for Literary Translation has had it confirmed that funding after 2008-2009 will be subject to specific conditions, which are yet to be spelled out.

The decisions to reduce funding to Arcadia Books and Anvil Press have, however, been reversed.

The publisher of Dedalus, Eric Lane, confirmed the decision, which arrived in a one-page letter earlier this morning.

"We've lost our funding," he said. "Our intention is to form Arts vs ACE and challenge it in the courts."

Though clearly emotional he described himself as being beyond rage at the decision after a struggle with the council that has lasted for four years.

"I'm just amazed at their stupidity and the level of malice," he said. "I can't be angry, I can't be shocked because I've had four years of this."

He still "doesn't understand" why a publisher specialising in literature in translation and new writing - two of the council's major priorities - has had funding of £25,000 removed.

"We'd like to see the documentation they've been holding from us," Lane continued. "They won't even tell us what date their officers first recommended disinvesting in Dedalus and they won't release the emails between London and Cambridge [the two offices working with Dedalus]."

With no assessments of recent books published by Dedalus - a standard part of the council's decision-making processes - in the documentation seen by the publisher, Lane is convinced the process has been "a fix".

The director of the British Centre for Literary Translation, Amanda Hopkinson, welcomed confirmation of one year's funding and the news that funding for the following two years had been ring-fenced.

"However we await with considerable interest and some anxiety to hear the new 'specific conditions' which we will have to fulfil," she said, "and of which we have not been informed." After a difficult period she hoped that the council appreciates the need to regain trust. "At the end of the day," she continued, "the Arts Council needs the arts sector more than the other way round."

Centerprise is an arts development agency which has been working in north and northeast London since 1995, running writers workshops, events and publishing Calabash magazine. The Centerprise bookshop on Kingsland High Street is due to remain open, as it is self-funding, but readings, writers' workshops and the magazine are threatened with closure.

"It's devastating, but it's hardly surprising," said the director of Centerprise Trust Emmanuel Amevor. The organisation was threatened with cuts three or four years ago, he explained.

He is still unclear about the reasons for the cuts, suggesting that it "has nothing to do with the work we do".

"Our audience numbers are up. Our attendance numbers are up," he said. "Everything is up and then they come up with this."

By contrast Peter Jay, the founder and editorial director at poetry publishers Anvil, declared himself "really pleased" that the decision to cut funding has been reversed. Faced with a 44% reduction in funding over two years, he found himself unable to sleep last night.

"When we got the original proposal to cut the grant we had no idea this was coming," he said. "We'd had a positive review in the summer, where we agreed with our lead officer on what we needed to do better."

He worked through Christmas and the New Year to produce a detailed response to a proposal which came entirely out of the blue.

"Now they seem to have done a complete turnabout," he said, "which is wonderful. We're not quite sure why."

The publisher of Arcadia, Gary Pulsifer, is equally mystified by the decisions.

He said he was both "relieved" and "pretty bloody irritated" by a process which has taken up most of his time for the last month.

"Think of the amount of time all these arguments have wasted," he said.

He is setting up an informal network of independent publishers to discuss funding issues and move beyond the opposition of the last month.

"For us publishers, cooperation amongst ourselves has got to be the way forward," he said. "We can't be at war with the Arts Council."

Christopher Arkell, the publisher of the London Magazine, an organisation which chose not to appeal against a cut in funding, was this morning already looking to the future, promising not to "let subscribers down".

"Our first issue post the Arts Council cut is in the post to subscribers today," he said.